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y V F7t>,- : "So^/S 5 

94th Congress 
2d Session 





i ^ : 


Prepared for the Use of the 









.'^ ^ APRIL 1976 

Printed for the use of the Committee on Foreign Relations 





JOHN SPAEKMAN, Alatama, Chairman 


STUART SYMINGTON, Missouri HUGH SCOTT, Pennsylvania 


GALE W. McGEE, Wyoming CHARLES H. PERCY, Illinois 


JOSEPH R. BIDEN, Jr., Delaware 

Pat M.Holt, Chief of Staff 
Arthur M. Kuhl, Chief Clerk 

Subcommittee on Multinational Corporations 
FRANK CHURCH, Idaho, Chairman 


Jerome Levinson, Chief Counsel 
Jack Blum, Associate Counsel 



Foreword by Senator Frank Church v 

Letter of transmittal vn 

Note ix 

Trip report xi 

Summary of findings 1 

Introduction 3 

Soviet grain supply position 4 

Shipments and deliveries 11 

Shortfall countermeasures 14 

Commercial practices 16 

Grain agreement 18 

Conclusions 20 

Glossary of U.S.S.R. Government agencies 23 

Appendices : 

Appendix I — Principal interviews 25 

Appendix II — List of economic information Supplied by the Soviet 

Union under the agricultural agreement 27 

Appendix III — Letter from Robert J. Blackwell, Assistant Secretary 

for Maritime Affairs, Department of Commerce 29 

Appendix IV — Agreement Between the Government of the United 
States of America and the Government of the Union of Soviet 

Socialist Republics on the Supply of Grain 31 


Digitized by the Internet Archive 
in 2013 


The Soviet Union has emerged in the past four years as a principal 
customer of U.S. grain. Because of this trend and the momentous 
political as well as economic impact it has had on the United States, 
Richard Gilmore of the staff of the Subcommittee on Multinational 
Corporations visited the Soviet Union November 23-December 1, 
1975, for purposes of studying Soviet policies and practices as they 
relate to grain. 

His findings raise numerous questions about the potential success 
of the recently signed agreement between the U.S. and the USSR for 
the suppty of U.S. grain, and the ability of the U.S. Government to 
acquire the information necessary to make this agreement enforceable. 
These are issues of the utmost importance having extended economic 
and political ramifications for the United States which the Subcom- 
mittee will want to consider. 

The views and conclusions in this report are those of the author 
and are not necessarily those of the Subcommittee or any of its 



April 1, 1976. 
Hon. Frank Church, 

Chairman, Subcommittee on Multinational Corporations of the Commit- 
tee on Foreign Relations, U.S. Senate, Washington, B.C. 

Dear Mr. Chairman: At the request of Senator Dick Clark (D- 
Iowa) and yourself, I visited the Soviet Union between November 23 
and December 1, 1975, on behalf of the Committee to discuss with 
Soviet officials and academicians matters relating primarily to grain. 
I also spoke with Soviet officials and knowledgeable observers about 
other forms of trade between the U.S. and the Soviet Union. 

The information transmitted in this report represents my personal 
accounting of what I was told in interviews, as well as some impres- 
sions I received in the course of general discussions. 

Some findings in this report are at variance with what has been 
publicly reported on the subject to date. I, therefore, suggest that the 
enclosed material and impressions be assessed in an overall context of 
Soviet objectives in its political, economic and commercial relations 
with the United States. 

Richard Gilmore. 



Since the writing of this report, the USSR Central Statistical 
Administration has published figures on grain production for the 
Soviet Union. For the calendar year 1975 official Soviet figures are 
now 140 million metric tons. This amount is 22 million tons lower than 
the lowest estimate I received during my visit and yet there has not 
been any official upward revision in the expected level of Soviet grain 
imports. While the extremely low crop production figure is important 
in itself, equally noteworthy is the fact that the U.S. Government 
did not indicate any advanced accurate knowledge about Soviet 
production levels nor has it yet shown any certainty about expected 
levels of imports, exports and storage for the Soviet Union. 

Additional material has come to my attention on other issues raised 
in this report, primarily regarding commercial practices. This infor- 
mation was acquired after my visit to the Soviet Union and, therefore, 
will be more fully developed in the course of the Subcommittee on 
Multinational Corporations' investigation of the grain trade. 


GS-5G2— 7( 



The purpose of this staff study tour in the Soviet Union was fourfold : 

1. To provide Committee members with background informa- 
tion on the Soviet Government's purchases and sales of U.S. 
and non-U. S. grain, their present grain production and storage 
position and plans for the future. 

2. To assess Soviet capabilities in handling foreign grain enter- 
ing their ports. 

3. To determine Soviet Government views concerning the 
political and economic significance of the U.S. -USSR Grain 
Agreement signed on October 20, 1975. 

4. To consider how the Agreement will affect future commercial 
sales of U.S. grain to the Soviet Union. 



Summary of Findings 

Grain is a highly charged political and economic issue at the present 
time in the Soviet Union. There is, consequently, no completely 
consistent statistical reporting of what Soviet crop production for the 
1975 harvest will be nor what actual receipt of imported grain from 
the U.S. and other foreign suppliers has been up through the end of 
November, 1975. There is extreme reluctance on the part of Soviet 
officials to identify actual storage capacity or figures for residual 
stocks within the Soviet Union. Commercial dealings with private 
grain companies are handled with the utmost secrecy and no official 
freely volunteered any information about how the Soviet Government 
intended to implement the Five Year Purchasing Agreement. All 
Soviet officials and academicians I spoke with applauded the U.S.- 
USSR grain agreement, each for different reasons, as beneficial to 
their country. 

The Soviets maintained that their country's shortfall for the year 
August 1, 1975, to August 31, 1976, will be 25 million tons. That is 
the amount of grain they have indicated they will import which they 
also equate with the current shortfall. They insist that there will be 
no additional purchases or deliveries of foreign grain during this 13- 
month reporting period. One official ventured to give his personal 
estimate of Soviet crop production for the 1975 harvest at 160-162 
million tons. 

All Soviet officials agree that there has been a shortfall between 
planned production levels and the actual 1975 grain harvest. They do 
not agree on the short term remedies. 

One highly qualified official insisted that there had been no unusually 
high distress slaughtering of cattle or hogs as part of an official effort to 
conserve supplies. Another official, however, hinted that slaughtering 
of hogs and poultry had increased recently because of the feed grain 
shortage. This official confirmed that feedgrain rationing and the relo- 
cation of herds away from drought areas lias already taken place. 

There is considerable disagreement among Soviet officials about the 
capacity of the ports, railroads, and barges to handle large quantities 
of grain imported to the Soviet Union. Figures about the maximum un- 
loading capacity vary in the range of 3.2 million tons of grain per mouth 
in all Soviet port-;. At least one official source described congestion ai 
the ports and railcar shortages. 

I was told that the Soviet Union intends to maintain its g] 
ports and stocks at 1974-1975 levels. At that time exports were ( 3ti- 
mated to be roughly 8 million too.-. No figures on stock holdings in the 
last year were provided. 

Soviet officials expressed little willingness to participate in any in- 
ternational initiative at this time for the esti Lent of an inter- 
national grain vc-axc system or for a UN sponsored effort infood as- 
sistance and information sharing. 

(I ) 

Regarding other trade issues, two main points emerged from my 
conversations. Firstly, the Soviet Union is extremely interested in 
developing forms of joint ventures with American multinational 
corporations inside and outside the Soviet Union. The Soviets look 
very favorabfy on most commercial transactions involving American 
multinational corporations, whether in cooperation with the parent 
company or its European or Japanese affiliate. Secondly, it appears 
Soviet officials are mainly interested in maintaining an upward trend 
in trade relations with the U.S. They attach considerable political im- 
portance to an increase in trade, but they did not emphasize the neces- 
sity of heavy U.S. Government credits for this trend to continue. 


During the last week of November, officials and bureaucrats in the 
Soviet Union had already begun to gear up for the 25th Party Con- 
gress in February and the announcement of the new five-year plan. 
Kremlinologists are busy at this time making their best guesses about 
the lineup within the ranks of Soviet leadership. Who stays and who 
goes depends to some extent on how convincingly those in positions 
of power in the ministries and state committees are identified with 
publicized successes under their regime. The eventual requirement for 
personal advancement is how convincingly an official conveys the 
impression of great accomplishment. It is as important to maintain 
what may actually be an illusion of success before the rest of the world 
as it is within the Soviet Union. 

Designing a new five-year plan is as much a look back as a projection 
of better times to come. A positive cast must be put on any poor per- 
formance to avoid being displaced. Bureaucrats jockey over bigger 
budget allocations and personnel assignments. Those ministries, state 
committees and agencies dealing with the Soviet economy doubtlessly 
understate their capacity to produce in an effort to protect themselves 
against having to fulfill high growth targets determined through the 
planning process. 

In this kind of hedging operation of Party and bureaucratic games- 
manship, the risks often are very high. Personal power and the growth 
of the Soviet economy may be directly affected by the outcome. When 
there is a bad crop year like the one which the Soviet Union is now 
experiencing, the forces already described are likely to be at play. The 
stakes are high. 

In the period 1971-1975, the agricultural sector received approxi- 
mately 25 percent of budget outlays. Secretary Brezhnev and his 
predecessor, Khrushchev, have stressed extensive land reclamation, 
farm mechanization and livestock building programs as essential 
elements in the growth of the Soviet economy. With greater emphasis 
on consumer satisfaction with respect to meat production, demand for 
grains undoubtedly has increased rapidly. The leadership has chosen, 
as a result, to link its commitment to improved living standards for 
Soviet citizens with its ability to provide steadily increasing supplies 
of grain. 

While traditionally an importer of certain agricultural commodities, 
the Soviet Union is also an exporter of grain, primarily to Eastern 
European countries. These countries, under the leadership of the Soviet 
Union, are members of the Council for Economic Mutual Assistance 
(CEMA). They each have bilateral trade agreements with the Soviet 
Union and have developed their economies until recently in ways 
which made them economically dependent upon the U.S.S.R. For the 
Soviet Union to keep control over its European satellites, it is essential 
that lines of economic dependency are preserved. Grain exports to 
these countries have historically been an important part of the 


It would also seem logical that Soviet leadership must downplay 
the significance of having had to import substantial quantities of 
U.S. grain in 1972 and now again in 1975. 1 Otherwise, heavy agricul- 
tural imports become an admission of weakness in other countries 
eyes. The Soviets are also sensitive to external pressures from develop- 
ing countries, who have recently expressed their opposition to the 
Soviet Union's becoming a preferred buyer of grain on the world 
market, particularly in the United States. 

There are, therefore, important political and economic reasons both 
of an internal and external nature which help explain why Soviet 
officials may want to misrepresent their own internal needs with 
respect to grain consumption (depending on whom the} r are talking 
to about these delicate matters) . As a result, what I was told may be 
important for its factual content, but, in all likelihood, the greater 
significance lies in the selection and presentation of information given 
to me, the sources of material, and the willingness of officials to discuss 
these sensitive issues with me during this unpredictable period in 
Soviet politics. 



There was considerable disagreement among Soviet officials about 
USSR's anticipated production for 1975. One official in the Ministry 
of Agriculture predicted that the Soviet Union would have a grain 
harvest of roughly 195 million metric tons in 1975. Another in the 
Ministry of Procurement indicated that his personal estimate of 
Soviet grain production 2 for the harvest in calendar year 1975 was 
160-162 million metric tons. As late as July 15, the U.S. Department 
of Agriculture estimated Soviet crop production at 195 million 
metric tons, then by early August revised downward its estimate to 
1S5 million metric tons. By October 24, The Department had officially 
adjusted its forecast to 162 million metric tons and as of October 31, 
USDA submitted yet another preliminary projection for 1975/1976 
at 148 million metric tons. 3 

On December 4, the New York Times reported that on the basis of 
remarks made the previous day before a session of the Supreme 
Soviet by Grigoiy I. Vaschenko, Chairman of the Budget and Plan- 
ning Commission of the Council of the Union and member of the 
Party's Central Committee, it could be calculated that Soviet pro- 
duction would be as low as 137 million metric tons. 

On December 8, a representative of a visiting Soviet delegation from 
the Ministry of Procurement expressed great surprise over reports in 
the Western press that Soviet production would be as low as 137 
million metric tons. Instead he stuck with the 160-162 million metric 
tons' estimate provided by one high level official at Procurement, 
already an admission of a greater shortfall than previously suggested. 
The Ministry of Procurement reportedly can be counted on to give 
the lowest crop production figures of all ministries because of its job 

i 18.200,000 metric tons of wheat, CO*ri, and barley in 1072 and at l<>ast 13.2 million metric tons at the time 
of tiiis writing with an agreed ceiling of 17 million metric, fans for a!i '■>'■ 1975. 

2 Winter wheat, winter rye, winter barley, spring wheat, barley, oats, pulses, millet, buckwheat, rice, 
rye and corn. 

3 USDA. Foreign Agriculture Circular. FO 13-75. USDA reports on the basis of the erop 3 ear beginning 
.July !. The latest estimate, therefore, would not include supplies existing between January 1 arid July 1 
so Soviet figures would understandably be higher, particularly since the 1074 harvest was a relatively good 
one at approximately 100 million metric tons. 

assignment. The Ministry of Procurement is responsible for the 
purchase, storage, and utilization of all state grain resources within 
the Soviet Union. If shortages occur in one of the sectors where grain 
is allocated (food, industrial, and livestock feed) , procurement would 
more than likely be held accountable. Any overstatement of production 
would raise expectations of greater disbursements for which the 
Ministry of Procurement is responsible. For just the opposite reasons, 
the Ministry of Agriculture usually is the source of the most optimistic 
production forecasts. Despite their different objectives and hence, the 
discrepancies in production figures, no ministerial representative 
accepted the plausibility of anything lower than 160-162 million 
metric tons. 

The announced goal for 1975 was 215.7 million metric tons and to 
fulfill the 1971-1975 five-year target, the Soviet Union would have 
had to produce 208 million metric tons in 1975. 4 There has not been 
any official downward revision of these figures, although there have 
been individual local officials, and now a member of the Party's 
Central Committee who have spoken out on the subject to a Soviet 

Using the current official figures, the shortfall or difference between 
the annual plan target of 215.7 million metric tons and the low estimate 
of 160-162 million metric tons would be 53.7-55.7 million metric tons. 
Applying the more radical calculation would, of course, result in an 
even greater shortfall of 78 million metric tons. The U.S. Department 
of Agriculture has indicated that the "estimated grain utilization for 
the 1974/1975 consumption year" (July 1, 1974-June 30, 1975) is 205 
million metric tons and a crop of less than 205 million metric tons 
poses "serious problems.' 7 5 

Therefore, under any set of expectations, the 1975 shortfall is 
considerable. Assuming that the Soviets do not intend to cutback 
drastically on demand for grain, the only way to make up for shortages 
in the current crop year is to import or draw-down on existing stocks. 
Local crop production plus imports and existing stocks, therefore, are 
the other essential parts of any discussion of the current grain supply 
position in the Soviet Union. 


No official was prepared to identify what actual residual stocks were 
or what levels were planned for in 1975. 6 At the Ministry of Agricul- 
ture I was told that it was none of the United States' business to know 
what the Soviet stock position was at any given point in time. 
The USSR Government claims that it does not have that kind of 

The U.S. Government interpretation of Article II of the 1973 
U.S. -USSR Agricultural Agreement includes exchange of information 
on stocks. The Soviets have not as yet provided this material. 7 Judging 
from the reaction I received when I raised this question, and compar- 
ing it with what other government officials have been told, it would 

* USDA, Foreign Agricultural Circular, "FG 14-75, Nov. 5, 1975. 

* USDA, Foreign Agricultural Circular, FG 14-75. 

* Residual stocks for purposes of this report mean stocks remaining after consumption and exports in a 
given calendar year. 

i See Appendix 3, List of Economic Information Su])])li<d by the Soviet Union under the Agricultura 

68-5G2— 7< 


appear unlikely that the Soviets would be forthcoming in providing any 
data on stocks in the near future. 

Nonetheless, the United States has through its own resources been 
able to make some intelligent guesses about Soviet stocks. The Central 
Intelligence Agency has published an unclassified document on the 
Soviet grain balance, 1970-73, which contains figures on changes in 
stocks and losses in the USSR. The sum of residuals in "grain balances" 
since 1970 is listed as: 

Table 1 » 
_ r Million 

l ear : metric tons 

1970 98.0 

1971 88. 

1972 90. 6 

1973 149. 7 

i Central Intelligence Agency. "The Soviet Grain Balance, 1970-73," A(ER) 75-68. September, 1975. 

After consumption and exports, the annual amount remaining as 
opposed to the cumulative figure cited in table 1 was estimated to be: 

Tabled 2 

^ Million 

lear: metric tons 

1970 6. 120 

1971 5.202 

1972 5.416 

1973 6.711 

2 CIA. "The Soviet Grain Balance." 

Figures for the last two }^ears are more difficult to obtain, although 
there are USDA statistics on stock changes beginning in 1973/74 
which would seem to indicate that Soviet stocks remained relatively 
constant over the last five years. 



tons 2 



















i USDA, Foreign Agriculture Service, statistics on "U.S.S.R., Total Grain Supply Distribution 1964-65—1975-76." 
2 Minus indicates net exports and a drawdown in stocks. 

These findings bear out the Ministry of Procurement's claims that 
Soviet stocks remained at roughly the same level during the past four 
years, and would not necessarily be reduced this year, thanks to 
purchases of U.S. grain. The latest sales, one official said, could be 
used for replenishing Soviet stocks. 

Representatives from the Ministry of Agriculture were reluctant to 
discuss anything related to storage capacity. At the Ministry of 
Procurement, on the other hand, I learned that current storage 
capacity within the Soviet Union was 100 million tons and that an 
additional 30 million metric tons would be constructed during the 
1976-80 five-year plan period. A large part of the expansion program 
will apparently be for terminal elevators and the improvement of 
loading/unloading facilities for grain at Soviet ports. Leningrad, for 
example, has plans according to local city officials to build a new 


A high official at the Ministry of Foreign Trade said the Soviet 
Union had purchased 25 million metric tons of foreign grain to 
cover the period August 1, 1975 through August 31, 1976. He 
emphatically denied rumors that the USSR had already purchased 
more or would be shopping around for more grain during this time 
period. This official insisted that as far as he was concerned, the 25 
million metric ton figure for foreign purchases was identical to the 
USSR's grain shortfall during its 13-month statistical calendar year, 
August 1-August 31. In other words, he thought that any grain deficit 
his country would have to incur because of a poor harvest could be 
made up with 25 million metric tons of imported grain. 8 

Thirteen of the 25 million imported metric ton total were purchased 
from the U.S. according to an official spokesman at Exportkhleb, the 
organization responsible for importing, selling domestically, and 
exporting grain, and an official at the Ministry of Foreign Trade wsa 
most emphatic in stating that the Soviet Union had no intention of 
buying more grain from the United States within the August 1- 
August 31 marketing year. 

While no official claimed to know how Soviet purchases were divided 
by grain type, the Foreign Agriculture Service of USDA on Novem- 
ber 11, 1975 estimated the following division. 9 

metric tons 

Wheat 4, :>.Y2 

Corn 8,648 

Oats 70 

Total 13, 265 

Sources at the Ministry of Foreign Trade indicated that the remain- 
ing 12 million metric tons were non-U. S. origin grain, a portion of 
which was supplied from Rumania, Hungary, and Bulgaria. Almost 
all of the non-U.S. origin portion, he maintained, was purchased 
during the U.S. Government-declared moratorium on sales to the 
Soviet Union, July 24-October 20, 1975. 10 

s Usins; the 160-102 million metric tons attributed to sources at the Ministry of Procurement, the shortfall 
is 53.7-55.7 million metric tons, over twice the 1975 shortfall claimed by the Ministry of Foreign Trade. 

' J USDA, Foreign Agricultural Service, C&F, FCA on November 11, 1975, estimates of Soviet grain 

i° The USSR, for example, purchased over J4 million tons or Brazilian maize between April 1 and Novem- 
ber 30, 1975. Brazil is also said to have sold substantial quantities of soybeans to the USSR in 1975. 


Table 4 

Estimated Soviet grain purchases ! 

By grain: metric tons 

Wheat 13, 452 

Corn 10,243 

Barlev 2,330 

Oats 500 

Total 26, 525 

By origin: 

United States: 

Wheat 4, 552 

Corn 8, 643 

Oats 70 

Total 13, 265 


Wheat 4,200 

Barlev 2, 000 

Oats 100 

Corn 200 

Total 6, 500 


Wheat 1,400 

Corn 1, 000 

Total 2,400 


Wheat 1,500 

Barley 100 

Oats 30 

Total 1,630 

Brazil: Corn 400 

West Europe: 

Wheat 1,000 

Barley (Spain) 130 

Total 1, 130 

East Europe: 

Wheat 800 

Barley 100 

Total 900 

Optional 300 

i USDA, FAS, C&F, FCA November 11, 1975 estimates. 

Aside from the fact that U.S. Government figures are slightly 
higher for Soviet purchases of U.S. grain to date than those provided 
by the officials with whom I spoke, there are two major discrepancies 
between publicly reported U.S. projections on overall Soviet import 
requirements and the final level of their purchases in the U.S. and 
what Soviet officials indicated to me. In briefings on the Grain Agree- 
ment for members of Congress and staff, U.S. officials have indicated 

that an understanding was reached with the Soviet Union whereby 
it agreed not to purchase without consulting the U.S. Government 
more than 17 million metric tons before the new agreement enters 
into force on October 1, 1976. Informed American sources think that 
the Soviets will need every bit of the 17 million ton ceiling, if not 
more, whereas the Soviets insist they will not buy more than the 13 
million they have already purchased. Secondly, USDA predicted on 
October 24, that Soviet import needs from all foreign sources will be 
over 30 million metric tons for the 15-month period, July, 1975-Sep- 
tember, 1976. n Officials at the Ministry of Foreign Trade were firm 
about the 25 million metric ton figure; on the other hand, Viktor I 
Pershin, Chairman of Exportkhleb, in translated remarks appearing 
in the Western press, is reported to have said that the Soviets have 
already purchased 30 million metric tons. 

The estimates concerning the import requirements of the Soviet 
Union in the period August 1, 1975 to September 31, 1976 are, thus, 
significantly at variance. Any conclusions must be cautiously hedged 
and may in any event prove worthless. 


Figures for Soviet exports are equally imprecise. Shipments of 
Soviet grain have in the past gone mostly to CEMA countries and 
states like North Korea, North Vietnam, and Cuba averaging 6 million 
metric tons per year. The Western press and other observers of 
Soviet agriculture have speculated that Soviet exports this } T ear will 
be cut back drastic ally because of the shortfall in the Soviet Union. 
USDA estimates that worldwide Soviet exports for 1975/1976 will not 
exceed 1 million metric tons. Other U.S. Government officials have 
suggested higher figures, but they all agree that the amount will be 
sharply reduced from their estimates of last year's export levels, 
ranging from 5 million to S million metric tons, for the period July 1, 
1974-June 30, 1975. 

In normal times the Soviet Union exports annually an average of 
iy 2 to 2 million metric tons to Poland of the total 6 million metric 
tons average level of exports to Eastern Europe. Apparently, the 
Soviet Union was forced to cancel its contracts with Poland this year 
because of its own bad harvest, and thus, Poland was forced to buy 
more on the open market than in past years. Poland was rumored to 
have been negotiating for as much as 6 million metric tons of grain 
from the U.S. before U.S. Government officials informally requested 
on September 10, 1975 that the Polish Ambassador in Washington 
impose a moratorium on further grain purchases from the United 
States. If, indeed, Soviet grain deliveries to Poland were cancelled, in- 
formed sources think that the pattern was repeated with other Eastern 
European consumers like East Germany and Czechoslovakia. 

Nothing I was told suggests that the USSR will reduce grain exports 
anywhere other than Poland. Even with respect to Poland, officials 
were reluctant to admit that there would be any change. A high official 
at the State Committee for Foreign Economic Relations (this com- 
mittee oversees all development assistance projects, directs aid pro- 
grams, and Soviet foreign investment in socialist and non-socialist 
countries) stated categorically that the Soviet Union will fulfill all 

u USDA News, October 24, 1975. 


its long-term food assistance programs. He was referring to the long- 
term bilateral agreements the USSR has with the other CEMA 
members, den}dng that there would be any disruption in the flow of 
grain from the Soviet Union to these countries. He emphasized that 
Soviet commodity assistance programs would be maintained irrespec- 
tive of whether the USSR had a good or a bad crop this year. 

At the Ministry of Foreign Affairs, Soviet officials indicated that 
the USSR would maintain its obligation to its allies, despite the fact 
that it was a bad year for them. They indicated that exact levels for 
food assistance would have to be worked out by the State Committee 
for Foreign Economic Relations and State Planning Committee 
(GOSPLAN). Their response was more ambiguous than at other 
government ministries and committees, particularly the State Com- 
mittee for Foreign Economic Relations and the Ministry of Foreign 
Trade where officials indicated that the 25 million metric ton import 
and shortage figure they provided included "supplies to normal 
countries." In the context of our converation, I inferred that they 
meant the Soviet Union's level of imports this year would help satisly 
the maintenance of supplies to traditional aid recipient and other 
importer countries 12 as well as maintain stocks within the USSR at 
the level of last year. 

Regarding Poland, Exportkhleb and Ministry of Foreign Trade 
sources, indicated that no deliver}^ contracts with Poland have been 
cancelled. My question was whether or not the Soviet Union cancelled 
any of its contracts with Poland. I did not use the term "delivery con- 
tract" so it is entirely possible that they chose not to answer my ques- 
tion by discussing another entirely different question. The USSR by 
all reports had to cancel contracts with Poland, but they may not have 
ever reached the point of concluding delivery contracts with the Poles 
in which case there would be nothing for them to cancel as far as deliv- 
eries are concerned. These officials went on to say that just because 
the Soviet Union has a grain problem this year, it did not mean that 
they would have to cancel any contracts with Poland. So as to avoid 
any definitive response to this question, one official modified what he 
said earlier by saying that if necessary, the USSR would find "some 
other solution" for Poland. He may have had in mind newspaper re- 
ports that the Soviet Union promised to help finance Polish grain pur- 
chases on the open market as a means of fulfilling its contractual 

This key official was, on the other hand, very clear about the purpose 
of Polish purchases of U.S. grain. He said that Poland was not buying 
U.S. grain in behalf of the Soviet Union in August and early Septem- 
ber, before the moratorium on sales to the USSR was expanded to in- 
clude Poland as well. As far as he knew, then, their purchases were 
strictly for Polish consumption. 

The most noteworthy aspect of my discussions concerning exports 
was the impression Soviet officials conveyed of a determination to keep 
exports at levels not drastically different from earlier years. They were 

'-' Tlic U.S. Embassy official Who accompanied me to the Ministry of Foreign Trade Interview under- 
stood the Soviets to say they plan no grain exports during the 1075/76 crop year beyond com m i tm ents to 
socialist blcc countries. II was my Impression mat the reference to "normal countries" included other 
(•( inm-ics as well, (in either case, we would both agree that North Korea and Cuba could be included in 
this definition.) 


indifferent as to whether or not these exports would have to come in 
part from foreign sources. 


With heavy imports ranging from at least 25-30 million metric tons, 
depending upon whose figures one uses, the next critical problem for 
the Soviets is how to handle this large-scale influx of foreign supplies. 
High officials at the Ministry of Merchant Marine indicated that 
Soviet ports are equipped to unload roughly 3.2 million metric tons of 
grain per month — an average of 100,000 tons daily, with the rate de- 
clining in the winter months. The major receiving ports for U.S. grain 
are Novorossiysk, Odessa and Illichevsk on the Black Sea and Lenin- 
grad on the Baltic Sea. Leningrad officials indicated that in November 
only 20,000 metric tons per day and slightly less for the Black Sea 
ports were unloaded. If they are right, Soviet port capacity for re- 
ceiving imported grain would be less than the 3.2 million metric tons 
level cited at the Ministry of Merchant Marine. Any figures under 3.2 
million would raise some doubts as to whether or not the L T SSR would 
be able to import all the grain it has or plans to purchase abroad. 

Ministry of Foreign Trade spokesmen said that the proven unload- 
ing capacity of Soviet ports was a maximum of 2 million tons, while 
Merchant Marine officials indicated that a monthly average of 2-2.2 
million tons had already been programmed for November. In contrast 
to these target figures, Foreign Trade officials said that about 4.5 
million tons of American grain had been shipped since August 1. with 
actual deliveries of grain from all sources running at an average of 1 
million tons per month and 1.5 million for November. At a minimum 
the Soviets must unload or take possession of all American grain they 
have purchased by October 1, 1976, when the Grain Agreement enters 
into force. This deadline suggests that there will be a build-up of 
deliveries during the winter months. When a-ked whether this in- 
crease has already strained Soviet ports, the same official at the 
Ministry of Merchant Marine who claimed that Soviet ports had 
an unloading capacit} r of 3.2 million tons, admitted that the 2.2 
million tons programmed for November caused considerable congp-tion 
in the ports because many of the American vessels booked in October 
were arriving at the same time as previously scheduled shipment-. 
He did sa} T , however, that despite the temporary congestion, he en- 
visaged no problem for Soviet ports to handle all grain shipments 
While the Ministry of Merchant Marine and Ministry of Foreign 
Trade figures were not identical, officials from both ministries were 
confident that Soviet ports could handle all the necessary shipments. 

The U.S. Merchant Marine Administration reports the following 
level of shipments leaving the U.S. for delivery to the Soviet Union. 
(These figures do not represent confirmation of delivery within the 
Soviet Union, just shipments leaving the L T .S. destined for the 
U.S.S.R.) U.S. information on total shipments correspond to esti- 
mates given to me by informed Soviet official-. 


[Left the United States (thousand metric tons) 1975] 

Flag vessel 



ber October 

Novem- Decem- 
ber ber 


United States 

42, 263 

28, 309 


259, 797 

609, 462 
106,241 251,795 
380, 203 1, 134, 085 

592, 373 96, 539 
214,613 17,768 
961,972 112,413 

1, 420, 514 


3d flag 

2, 963, 488 



367, 520 

486, 444 1, 995, 342 

1, 768, 955 226, 720 


1 Maritime Administration and Agriculture vessel inspector reports. 


metric tons 

Percent of 



United States 






3d flag 

4, 388. 2 



18.143.1 ___. 

i Projected total metric tons, last crop year and this one. 
Source: Based upon actual vessel sailings. 

The Ministry of Merchant Marine offered a number of explanations 
for whatever congestion 13 existed in the ports during the months of 
October and November. Officials said that as a result of the morato- 
rium on sales to the Soviet Union, American vessels scheduled for 
deliveries to the USSR were backed up in the U.S. When shipments 
finally did resume after the Merchant Marine rate agreement in last 
September, the Soviets found themselves with 1 million tons scheduled 
for arrival between mid-October and November (see table 6) over and 
above the 2.2 million they expected. Secondly, one well-informed 
Soviet official confessed that the USSR suffers from a "rail transpor- 
tation problem" on a seasonal basis. It is the harvest season which 
places the severest strain on the rail system, creating a shortage of rail 
cars at the ports in October. He thought November would not, how- 
ever, be as rough as October. 

Without adequate storage capacity at the ports, the Soviets rely on 
their rail system to distribute the grain into the interior of the country. 
Some ports, particularly the large ones like Novorossiysk in the Black 
Sea, are better equipped than others. In 1972, it had been reported that 
the Soviets had to dump grain on the ground at port sites, leaving it 
exposed and unprotected until it could be picked up for direct consump- 
tion or redistributed to points in the interior. As a result, Soviets were 
faced with a high loss ratio at the time, ranging between 5-10% of 
total shipments. Today, the storage facilities at the ports are reputed 
to be considerably better, but in my tour of the port of Leningrad, 
there was no evidence of any grain storage facility. According to one 
Leningrad officials, 25,000 of the 30,000 tons unloaded daily in the 
month of November were picked up by rail cars and routed as far as 
4,000 kilometers into the interior of the country. The other 5,000 tons 

13 1 did not see any congestion in the port of Leningrad which was the only port I was able to see. The 
term was used interchangeably with the "port problem" by the Soviet official. 


went onto barges which in summertime go up the Neva River but in 
winter go to the mouth of the river where their loads are emptied into 
rail cars. When I was in Leningrad, I was told there were 1,000 rail 
cars per day loading grain from the ships. Unlike 1972, deliveries this 
year have come on strong in the winter months when it is virtually 
impossible to leave vast quantities of grain uncovered. The availa- 
bility of rail cars during this season is, therefore, of the utmost impor- 
tance in limiting damage and loss. 

Most ports in the Soviet Union can only accommodate ships 250 
metres in length and in the 35-40,000 ton range with the exception of 
Odessa and Novorossiysk, both of which are deep water ports with 
berths for vessels in the 55-60,000 ton range. (Leningrad supposedly 
can handle ships up to 60,000 tons but it was not clear whether or not 
this size vessel could move through the Morskoy Canal from the Gulf 
of Finland fully loaded to berth or whether a vessel of that size would 
have to be partially unloaded at sea before passing through the canal 
to berth). As long as there are enough berths and the proper unload- 
ing facilities, shallower ports need not be a deterrent in handling vast 
quantities of imported grain. It does mean, however, that shippers 
who have chartered the larger vessels must break shipments up into 
smaller loads before delivery in the USSR. 

Merchant Marine Ministry officials indicated that the Soviet Union 
was considering negotiating for some storage space in Western Europe, 
just as had been contemplated in 1972. While these officials did not 
specify how much storage Soviets might rent or precisely where in 
Western Europe (the logical points are Rotterdam, Amsterdam, and 
Hamburg which are the main grain import and distribution centers for 
the European continent), they said that the purpose of renting these 
facilities would be to help route some of the imported grain through 
Europe. The northern ports in Western Europe are ideally suited for 
transporting grain to Eastern Europe or to smaller ports in the Soviet 
Union like Riga or Tallinn on the South coast of the Gulf of Finland. 
Renting storage in Western Europe could also facilitate breaking down 
large shipments into smaller loads for reshipment to a major Baltic 
port like Leningrad. There may be other explanations for Soviet rental 
space in Western Europe to store grain coming from the United States 
as well as other countries but they were not mentioned by any of the 

Aside from the rail car shortage, and the inadequacy of some of the 
port facilities, two additional explanations have been suggested for the 
port congestion during the time of my visit. Some informed observers 
think that there is a labor shortage at some of the ports which has 
contributed to the back-up of ships. Nothing in my conversations 
nor anything I saw could substantiate this claim. What was apparent, 
and openly admitted by a number of Soviet officials, was that adverse 
weather conditions are a permanent problem in the Soviet Union. I 
had, for instance, planned to visit the port of Odessa on November 29, 
but just prior to my departure Odessa had the worst storm it has 
experienced in the past 100 years. The port was virtually at a stand- 
still and the city was getting its electricity from generators on merchant 
vessels offshore. Leningrad has to use icebreakers to keep the port 
open from the middle of November to April and during this time, it is 
very difficult to accommodate certain kinds of \-essel traffic This 
year's weather has not been particularly favorable in the Soviet 


Union, thereby further contributing to delays in the discharge of 

Delays are an extremely important factor from the commercial 
point of view because the longer a ship has to wait in port, the more 
expensive it is for the charterer. The ship cannot be used for alternative 
cargoes; the shipper cannot meet other deliveries nor can the ship be 
chartered or subchartered to another party; or the charter time may 
run out before the ship makes its delivery. To protect the shipper, 
there are demurrage charges paid by the port authority if a ship's 
delay is caused by the port. Rail car or labor shortage would be subject 
to demurrage charges but climatic difficulties would not. I was told at 
the Ministry of Merchant Marine that the Soviet Union will have to 
pay substantial demurrage charges this year. U.S. vessels are now 
reporting a thirty to forty day waiting for berth period. 14 

Despite these difficulties, Merchant Marine officials were optimistic 
that the situation would stabilize in December and January when 
500,000 tons of U.S. grain are expected to arrive in U.S. bottoms. They 
thought the Soviet Union would be able to unload all foreign shipments 
contracted for during the 1975-76 period. U.S. officials at the Merchant 
Marine Administration have corroborated these conclusions by saying 
that they have seen nothing to suggest that the USSR would be unable 
to handle all it bought, at least as far as U.S. grain purchases are 
concerned, by October 1, 1976, when the new grain agreement is 
scheduled to be put into effect. 

U.S. observers have noted that the Soviets are not rushing their 
shipments, despite the initial lag in August and September, which 
may indicate that the Soviets do not intend to buy more grain in the 
near future. At the rate they are now importing, it would seem that 
they could import at least 25 million metric tons, particularly if they 
rent any Western European storage facilities to handle some shipments 
destined for the USSR. 


Whether the shortfall is only 25 million metric tons or whether it 
is of a much higher magnitude as reported in several papers here, the 
Soviets I spoke with indicated that certain countermeasures had 
already been undertaken and that others of a more long-term nature 
were planned. The greatest difference of opinion among Soviet officials 
and other expert observers of the Soviet economy lies in the stop-gap 

It has been suggested that the Soviets are degrading their bread 
by using lower quality wheat. An American student at Lenin Uni- 
versity in Moscow told me that she had seen a new quote placed on 
the walls of the Lenin Library cafeteria admonishing students and 
faculty: "Conserve bread. It's our national treasure." Also apparently, 
this is the first year that the Universit}' has begun to charge students 
for the bread on the tables, heretofore available without charge. The 
New York Times reported in a story on December 10, 1975, that 
travelers in Central Russia found bread being rationed in some stores. 
Just how illustrative these anecdotes are of a concerted government 

» Appendix III, Letter from Robert J. Blackwe.ll, Assistant Secretary for Maritime Affairs, Department 
of Commerce, January 1976. 


campaign to reduce wheat consumption is impossible for me to 

It is certain, however, that the Soviets are importing considerable 
quantities of wheat. What no one seems able to determine is just what 
the purposes are for these imports. A high official at the Ministry of 
Agriculture stated that there would be 44 million metric tons of wheat 
available in the current year for human consumption. It is not clear 
whether he was speaking only about domestic production or included 
imported grain in his determination of the amount of available supply. 
USDA has concluded, however, that "the quality of the recently 
purchased wheat indicated that most of it will be used for food while 
poorer grades of Soviet wheat are shifted to animal food." 15 The U.S. 
Government does not know, however, what portion of Soviet wheat 
consumption for human purposes comes from local production and 
what portion is satisfied by imports. The Soviet Union does publish 
some general statistics on wheat production and consumption, but 
again they do not tell us whether the USSR is dependent on imports 
in any way for its own food or whether there were other reasons for 
purchasing high grade wheat this year. 


Wheat (million metric tons) 



Total production 



Seed use ... . 



Food use... .. 



i Figures for 1974 are derived from the "Soviet Statistical Abstract, 1974" and those for 1975 from the "December 
Plenum Report". 

It is widely reported in the American press that the Soviets have 
had to resort to distress slaughtering of their livestock herds, par- 
ticularly hogs and poultry which are more dependent on feedgrains 
than cattle for their diet. A Ministry of Agriculture spokesman denied 
that there had been an unusually high slaughter rate for cattle or 
hogs as part of an official effort to conserve supplies. An official of the 
Ministry of Procurement, on the other hand, alluded to this possibility, 
but he added that "it was government policy not to cut back on one 
single head (cattle and hogs) if at all possible." 

Other steps mentioned by the Ministry of Agriculture spokesman 
were feed rationing for cattle, greater use of sunflower seeds for meal 
and shifting herds from drought and poor harvest areas to the more 
fertile, well Mipplied sections of the country. An official at Gosplan 
said that the current grain shortage severely affected the Soviet 
Union's balance of payments and that it would have an impact on 
the rest of the USSR's foreign trade. He was not more specific than 
that so no official has openly declared that the Soviet Union will cut 
back on its imports, step up its search for foreign credits or charge 
more for its exports like oil to CEMA countries to make up for the 
current imbalance. The closest admission that this approach could 
be expected was in the December 2 announcement by Deputy Prime 
Minister Nikolai K. Baibakov that there would be a lower growth 
target for the country in the next year. 16 

I -HA. "U.S. drain Balestothe U.S.S.R.," October, 1975. 
i 6 Wall str<(t Journal, December 3, 1975. 


Longer term measures appear less disputable on the surface. As 
one Gosplan official put it, the USSR will just "have to make its 
agriculture independent of climatic changes" by developing modern 
agriculture techniques, storage facilities, and greater use of fertilizer. 
Ministry of Agriculture spokesmen outlined a program of more invest- 
ment in irrigation and the mechanization of agricultural production. 
No one mentioned possible Soviet participation in any international 
reserve system. 


Dealings with Grain Exporting Companies 

At the Ministry of Foreign Trade it was said that Soviet purchases 
of foreign grain were made through contracts with the following com- 
panies — Continental, Cook, Cargill, Louis Drefus, Toepfer, andBunge. 
While stressing that Exportkhleb is guided by normal commerical 
considerations in deciding on what company it purchases grain from, 
one high official said that they do try to divide contracts evenly among 
the major exporting houses. The largest exporting firms are Continen- 
tal, Cook, and Cargill, listed respectively by order of size in their sales 
to the USSR. When asked why the Soviet Union has elected to deal 
consistently with the same companies, this official offered a number of 
reasons. Firstly, he said they were "the biggest" and "most reliable." 
Secondly, their size and multinational character enable them to pro- 
vide a host of connections with suppliers which the Soviets admit they 
do not have. Thirdly, these companies have established "many years of 
good relationships" with Soviet officials. 

In 1972, the Soviets reportedly signed most of their contracts for 
U.S. grain with the American parent companies who then purchased 
directly on the U.S. market. Apparently, the companies were dissatis- 
fied with this arrangement for numerous commercial reasons, and sub- 
sequently wrote contracts for United States or optional origin grain 
(optional origin permits the supplier with the consent of the customer 
to supply grain from any origin in fulfillment of the contract) through 
their subsidiaries in Western Europe. I referred to this practice and 
asked officials at Exportkhleb and the Ministry of Foreign Trade why 
the Soviet Union signed its contracts with the subsidiaries even when 
U.S. grain was involved. The answer I received was that the companies 
prefer this arrangement and as far as Exportkhleb is concerned, it 
makes no difference whether they buy through the parent or the 

The question of optional origin contracts is an important one be- 
cause it permits the buyer and the seller to take maximum advantage 
of market conditions to reduce costs and secure deliveries of grain 
scheduled for shipment. There have been rumors that the companies 
are extremely interested in using the optional origin clause which they 
have with the Soviets to allow them to switch from non-U. S. grain they 
purchased during the moratorium on sales to the Soviet Union to U.S. 
origin grain in order to provide more rapid delivery at lower prices. 

At issue, apparently, is whether the U.S. Government would con- 
sider the switchover to U.S. grain as a fulfillment of contracts written 
before the moratorium or as new sales. One official denied that any 
company has requested this option but as far as the Soviet Union is 
concerned, spokesmen for Exportkhleb and the Ministry of Foreign 


Trade maintained that any switchover would be considered completion 
of an old contract, and therefore, not a new sale. At the moment the 
U.S. reporting system would regard the switchovers as new sales, 
forcing either the companies or the USSR to change their inter- 
pretation of the original contracts if they intend to respect the un- 
written 17 million metric ton ceiling. 

Little more was disclosed about contracting procedures, except the 
noteworthy comment at the Ministry of Foreign Trade that the 
Soviets sign contracts for their grain purchases with the "majors" at 
fixed prices with no escape clause. The price is an f.o.b. (free on board) 
quoted price which means that shipping costs are handled separately 
and the quoted price is for grain ready to be loaded onto ships at 
ports in the United States. 

Finally, I was told that the same companies who are the major 
sellers of grain to the USSR are also exporters of Soviet grain to other 
parts of the world. One well-informed official explained that the 
Soviets resort to using the companies to handle much of their exports 
because of their "connections with end-consumers." He did not indi- 
cate whether there was any relationship between the supply contracts 
the companies handle for import to the USSR and the Soviet exports 
to other countries. Another knowledgeable source on these questions 
said he was certain that the companies handle Soviet exports to 
CEMA and other socialist countries. Usually these government-to- 
government contracts are set up on a barter, rather than on a con- 
ventional cash and credit basis which leaves unanswered the question 
as to whether these Soviet export contracts may not be considered 
partial pa} T ment in kind to suppliers for grain delivered to the USSR. 


According to key Soviet officials, Exportkhleb has not received any 
credits from American companies or banks with or without U.S. 
Government backing for the express purpose of purchasing grain. They 
said that the Soviet Government will do "most" of the financing itself. 
One American correspondent in Moscow suggested that a recently 
negotiated loan of $300 million assembled by a consortium of banks 
in Western Europe under the leadership of First National City Bank 
(Citicorp) was in all likelihood connected with Soviet payment for its 
grain imports. 17 


Sovrakht is the Soviet charter service under the Merchant Marine. 
It is responsible for everything related to ship chartering. It has a 
number of "corresponding agencies" which serve as ship brokers for 
Sovrakht in other countries. Glenas, the ship brokerage house in 
France, for instance, acted as the chief agent for Sovrakht in charter- 
ing the requisite number of ships to cover grain purchases made prior 
to the July moratorium. 

According to one official at the Ministry of Merchant Marine, 
70-80 percent of the current USSR contracts for U.S. origin grain 
were signed on an f.o.b. basis, although oven now the companies have 

i" The Chase World Information Publication, East W<st Markets reported in its October 20, 1975, issue thai 
Citicorp International Bunk, Ltd. was syndicating with Bocieti Generate (Paris) a of $300 million 
al 1.25* \ over the London rate (LIBOR) to the CJ.S.S.R. The Bank of International Settlements is referred 
to as the source lor a prediction thai the Soviets might borrow 1-2 billion on the Eurodollar market per \ eai . 


several contracts written c. & f. (cost and freight) or c.i.f. (cost, 
insurance, and freight), which means that shipping costs are covered 
in the overall price of the contract. As explained by sources at the 
Ministry of Merchant Marine, the shipping market is now depressed 
because of the number of vessels presently not in use. Oil tankers, 
for instance are often used to carry grain and before Sovrakht arranged 
its charters, these tankers were idle, thus reducing their charter costs. 
This market situation works in favor of the purchaser who is interested 
in chartering vessels. These same officials said that under the present 
circumstances the companies would not charter U.S. vessels because 
they were so much more expensive at $16 per ton than the going world 
market rate. Table 6 shows that the Soviets have chartered as of Janu- 
ary 1, 1976, 55.1 percent of all shipments in third flag vessels, belong- 
ing neither to U.S. companies nor the Soviet Union. 

When asked what Sovrakht had done to protect itself about demur- 
rage charges resulting from the delays in unloading grain at the ports, 
these officials said that generally it was Soviet practice to self-insure. 
Any savings from having their own insurance program were passed 
on in the form of lower shipping rates and it was stressed that this 
factor could explain why charges made that the Soviet Union is dump- 
ing its vessels on the market by artificially slashing prices are 

At the Ministry of Merchant Marine, we also spoke about Soviet 
complaints against the quality of U.S. grain shipments. I was told 
there were many complaints in this regard as well as charges of short- 
weighing. In this case Exportkhleb as the official Soviet importer 
discounts to its own customers (i.e. millers and farmers) for short- 
weighing and quality. Exportkhleb, in turn, receives a discount off the 
original contract price from the companies. In Leningrad, the port 
authority certifies the weight and quality of the grain as it is loaded 
into the rail cars. These certificates are transmitted along with other 
shipping documents to Exportkhleb and Inflot, the government 
agency service for foreign vessels. If the port certifies that there 
were no shortages in the shipments, then Exportkhleb can be held 
responsible for any loss of grain which may occur before or when 
shipments arrive at their final destination. Some informed sources 
think the loss rate (the disappearance of grain which remains un- 
accounted for) in the Soviet Union is as high as 10% of all supplies. 
One well informed official admitted that there were, at times, signifi- 
cant losses but that in every case he knew of they were resolved by 
Exportkhleb and its suppliers and customers. 


All Soviet officials I spoke with endorsed the U.S. -USSR Grain 
Agreement of October 20, 1975, 18 but their reasons differed slightly, 
reflecting to some extent the views of the individual ministry they 
were representing. 

At the Ministry of Agriculture, one high ranking official said the 
agreement provides the USSR with supply stability. Secondly, he 
sees the latest agreement as a logical extension of the Agricultural 

'8 Appendix IV, Agreement between the Government of the U.S. and the Government of the U.S.S.R: 
on the Supply of Grain. 

Agreement of 1973, completing what the 1973 accord had left undone. 
This official was referring to the issue of exchanging specific informa- 
tion on agricultural commodities as set out in Article II of the 1973 
agreement. U.S. Department of Agriculture officials and several 
Congressmen have contended that the Soviets failed to comply with 
the terms of Article II by not furnishing data on production and trade 
of grains in particular. 

. . . the continuing lack of Soviet response to our requests for current year 
data (especially forward estimates) on U.S.S.R. production, consumption, and 
trade of grains and other agricultural commodities. 

Since Soviet provision of forward estimates was specifically written into the 
Agricultural Agreement, the failure to provide such data has caused controversy 
which detracts from successes with other parts of the Agreement. The U.S. has 
explained that having such data would improve USD A forecasts on U.S.S.R. 
trade in grains, oilseeds and oilseed products, and that this greater needed knowl- 
edge would facilitate the necessary adjustments and thus be beneficial to both 
countries. 19 

The Soviet official countered by saying the Soviet Union has more 
than complied in furnishing the requisite information (Refer to 
Appendix III) . Furthermore, the new bilateral agreement for minimum 
sales and purchases should satisfy any former concerns the U.S. 
Government had about its inability to gauge what Soviet demands 
for grain would be in the upcoming year. I got the distinct impression 
that the Ministry of Agriculture interprets the new agreement as 
another expression of Soviet good faith in helping bring stability to 
American grain prices but that the USSR could not be more forth- 
coming in providing additional information along the lines suggested 
by USDA. In other words, the official Soviet position is that the 1975 
agreement would be an adequate substitute to whatever informational 
needs American officials claim the USSR has not yet provided under 
the terms of the 1973 agricultural accord. 

Exportkhleb and Ministry of Foreign Trade officials commented 
very briefly on the 1975 Grain Agreement in noting that it had 
"practical value and would bring stability." At the Ministr} r of 
Merchant Marine, officials emphasized the benefits of the Agreement 
for shipping. It would provide an opportunity to plan long-term 
actions on a regular basis, allowing the Soviet Union to schedule ship 
charters, actual shipments and deliveries from the U.S. more efficiently 

At the Ministry of Foreign Affairs, my questions were directed at 
the Soviet Union position on participating in an international reserve 
system, perhaps as an outgrowth of their entering into a bilateral 
agreement with the U.S. on grain sales and purchases. 

The U.S. Government has consistently handled these two issues on 
parallel tracks. When negotiations began for a bilateral grain agree- 
ment, the White House was already preparing finishing touches on a 
proposal to establish an international grain reserve system. The 
proposal was a follow-up to the President's UN address in the Fall of 
1974, the Secretary of State's address before the 1974 World Food Con- 
ference in Rome, and an ad hoc meeting of grain trading countries at 
the Wheat Council, February 10, 1975. The proposal was finally 
introduced formally at a preparatory meeting of the International 
Wheat Council in London, on September 29, 1975. At the same time 
the Grain Agreement negotiations were moving into an intense phase 

19 USDA, Background Paper on U.S. -U.S.S.R. Agricultural Cooperation Agreement. 


as the U.S. extended its moratorium on sales to Poland. American 
officials close to these negotiations admit that the U.S. team harbored 
a hope of extracting from the Soviets a willingness to join the Wheat 
Council talks on international reserves as part of a grain agreement 
package. The Soviet Foreign Affairs officials said that as early as 
November, 1974, their government was approached by U.S. officials 
on this matter and that unofficial talks were resumed in Washington 
via their embassy. They neither confirmed nor denied that there was 
any linkage between the signing of the Grain Agreement and their 
position on participating in the Wheat Council talks on a grain reserve 
plan. All they did say was that it was their understanding that any 
discussion of the U.S. proposal would continue in the bilateral context. 
They indicated that for now their government did not intend to 
participate in any such reserve system, nor in a UN sponsored effort 
for food assistance and information sharing. 

Regarding the U.S. effort to link Soviet oil deliveries to the U.S. 
with the Grain Agreement, officials at the Ministry of Trade made 
what could be interpreted as a passing reference to this question when 
they said that the oil crisis was a threat or a destabilizing factor to 
international security. They noted the disparity in the rate of inflation 
with prices of manufactured goods from the West increasing dispro- 
portionately to prices of raw materials which account for the largest 
portion of the USSR's exports. 

At the State Planning Committee (GOSPLAN), one official 
displayed some sensitivity to the contention that the Soviet Union 
wound up being favored over the developing countries and charged 
that there was an organized effort to discredit the Grain Agreement. 

Soviet Embassy spokesmen in Washington offered still another view 
of the benefits of the Grain Agreement for both the U.S. and the 
USSR. The Soviet Union, he thought, gained access to a secure supply 
of grain while avoiding American public opposition which his country 
experienced in 1972; the U.S. gained by Soviet willingness to purchase 
a fixed amount over a five-year period and by Soviet recognition of the 
political pressures mounting in the U.S. for an agreement of this kind. 

No one I spoke with regarded the Grain Agreement as a mainstay 
of detente between the United States and the Soviet Union. More- 
over, official Soviet reaction ranged from passive acceptance of the 
agreement to active support on the grounds of its commercial benefits. 


What is most striking is how little is known and how little the 
Soviets are prepared to disclose about key questions that ma}^ affect 
the successful implementation of the 1975 U.S.-USSR Grain 
Agreement. From the limited information provided in this report a 
number of important questions arise which American officials have 
either chosen to ignore or are unable to answer. 

Estimates for Soviet grain production in the 1975 harvest vary 
widely. Neither U.S. analysts nor Soviet officials can agree on the 
figures, even at this late date. While not as great, there is also a 
significant discrepancy between the amount of grain American com- 
panies and the U.S. Government report and Soviet officials maintain 

they will purchase from foreign suppliers up through August 31, 1976. 
The U.S. Government has an even more impressionistic idea of how 
much grain the Soviets will actually import. No one can yet accurately 
report how much below or above what the Soviets identify as their 
total foreign purchases covering August 1, 1975- August 31, 1976, will 
actually be delivered to the Soviet Union. The Soviets refuse to discuss 
their stock position and U.S. estimates are, at best, complicated 
guesswork. The Soviets claim that their stocks and exports will stay 
at the same level as 1974 when the USSR experienced a bumper crop. 
These claims run directly counter to all American reports. The biggest 
question mark of all regards Soviet commercial practices — how they 
handle their grain purchases and sales. 

Without a firm assessment of Soviet crop production, carryover 
stocks, and the level of imports and exports, the U.S. cannot detennine 
the overall supply position for the USSR in the current marketing 

Notwithstanding any unwritten agreement between the govern- 
ments of the United States and the USSR about consultations for 
Soviet purchases of U.S. grain above a ceiling of 17 million metric tons 
for corn and wheat, the U.S. Government still cannot specif}' how 
much U.S. and foreign origin grain the USSR will actually purchase 
and import before October 1, 1976, when the Grain Agreement enters 
into force. Furthermore, if American estimates of the 1975 Soviet crop 
failure are either on the low or high side, the Grain Agreement may 
serve to lock the U.S. into a supply position which is disadvantageous 
to its overall economic interests. 

If Soviet claims about their stocks and exports are correct, then the 
United States may find itself in the awkward position of having signed 
an agreement and accompanying understanding which assists the 
Soviet Union in stock replenishment and its own export program. By 
replenishing stocks, the United States could end up protecting Soviet 
leadership from any public admissions of failure in their own planning 
and production process. Freeing Soviet supplies for export by means of 
increased, relatively cheap imports of U.S. grain also may be a boon to 
the USSR's political and economic standing. Through their own pri- 
vate arrangements with the Soviet Government, American companies 
may also help to service Soviet grain contracts with Eastern European 
and other countries. In this way, the United States may be bolstering 
the Soviet Union's position with its allies by enabling it to maintain its 
position as a traditional supplier. Given the little we know about the 
Soviet supply position and Soviet motives for heavy grain purchases 
this year, it is equally possible that the Soviets arc purchasing high 
premium wheat from the United States because they find that it is 
cheaper than growing it themselves. The Soviet Union's Pacific Coast 
is far from domestic grain producing regions so it may be more eco- 
nomical for the Soviets to purchase some grain in foreign masfeets for 
domestic food requirements as well as for export commitments. Such 
normal commercial considerations may do more to explain the recent 
trend in Soviet foreign purchases than the flood of assessment; about a 
disastrous economic set-back for the USSR as a result of he current 
shortfall in production. If the Soviet response is largi rcial, 

then the Grain Agreement may not be the best tool to tie the USSR 
to the U.S. grain market and stablize prices. 


One explanation for any diversion of U.S. grain shipments, destined 
for the USSR, to Western Europe may be the inability of Soviet 
ports to accommodate the larger vessels above 40,000 tons. Another 
reason may be the quantity of grain imports, making it more expensive 
for the Soviets to pay for forced dela}^s than to divert the shipments 
on a temporary basis to Western Europe. 

Still another plausible explanation can be suggested for Soviet 
interest in storing their U.S. grain in Western European elevators. 
This option offers at least two main advantages for the USSR. It 
could enable them to buy in excess of any formal commitment to the 
U.S. Government to limit their purchases of U.S. corn and wheat. 
Secondly, it could facilitate re-exporting this grain to points outside 
the Soviet Union in violation of the Grain Agreement. 

The U.S. trading system is not foolproof, and it appears that the 
Soviets are well aware of the loopholes. The U.S. Government cannot 
accurately determine the level of U.S. grain purchases made by the 
Soviet Union nor the ultimate destination of U.S. grain shipments. 
This situation arises from the fact that the Soviet Union knows almost 
as much about the commercial practices of the major U.S. exporters 
as the U.S. Government does. If the Soviets are negotiating for storage 
space in a private American company's subsidiary terminal in a 
Western European port, it is extremely difficult for the U.S. Govern- 
ment to track U.S. grain shipments with designated delivery to the 
USSR. Once the grain is deposited in one of these elevators, it is 
easily transshipped at a later date to other destinations. 

In light of the fact that the Soviet Union is planning to build large 
grain terminals at Soviet ports plus its interest in renting storage 
space in Western ports, the Soviet Union may be directing more of 
its attention to becoming a grain merchant. In this case the Grain 
Agreement might make it easier for the Soviets to become resellers 
on the world market in competition with the U.S. 

Without hard data, there can be no firm and fast conclusions. The 
alternatives I have outlined remain, therefore, only hypotheses. No 
matter how the Soviet Union responds, it is likely to act in a way 
that would maximize its own commercial interests. When it comes to 
grain, I am left with the impression that the Soviets limit themselves 
to a pursuit of these objectives and do not confuse them with other 
trade issues which in their estimation reflect the more general political 
and economic climate of relations between the USSR and the United 

The U.S. Government, on the other hand, appears to have placed 
a high priority on the political value of U.S. exports to the Soviet 
Union. The question remains, however, whether the U.S. Government 
has succeeded in achieving even these goals, quite apart from any 
economic interest when it concluded the 1975 Grain Agreement with 
the USSR. 


Glossary of USSR Government Agencies 

CEMA — Council for Economic Mutual Assistance, the Socialist 

Eastern European Country economic pact. 
Exportkhleb — Organization under the Ministry of Foreign Trade 
responsible for the import and export of grains and 
grain products. 
GOSPLAX— State Planning Committee. 

IMEMO — Institute of World Economics and International Relations. 
IXFLOT — Service and enforcement agency for foreign vessels under 

the Ministry of the Maritime Fleet. 
Sovrakht — Soviet charter service under the Ministry of the Maritime 


Appendix I 
Principal Interviews 
monday, november 24 

Ministry oj Foreign Trade 

N. V. Zinov'yev, Chief, Administration for Trade with the Countries 
of the Americas. 

A. V. Mel'nikov, Administration for Trade with the Countries of 
the Americas. 

Ministry oj Agriculture 

Deputy Minister B. A. Runov. 


Ministry oj Foreign Affairs 

Lev. N. Astafyev, Counselor, Department of International Eco- 
nomic Organizations. 

Valentin Shchetinin, Dean, Faculty of International Relations, 
Institute of International Relations. 

Igor P. Sevostyanov, 3rd Secretary, USA Division. 

USA-Canada Institute 

Ye. S. Shershnev, Deputy Director. 
Igor Aremiev, Research Fellow. 


State Committee jor Foreign Economic Relations 

Deputy Chairman Kul'yev. 
Ministry oj Foreign Trade 

E. M. Kuz'kin, Deputy Chief, Main Administration for the Import 
of Industrial Raw Materials. 

I. F. Mikhailov, Vice President, Exportkhleb. 

Agayev, Director of Grain Department, Exportkhleb (served as 

Ministry oj Procurement 

Deputy Minister Yu. V. Shilkin. 

M. M. Kuznetsov, Chief, Foreign Relations Department. 

A. I. Luginin, Deputy Director, Main Administration for Feed 



State Committee jor Science and Technology 
Dr. A. E. Aykazyan, Chief, USA Section. 





V. V. Mordvinov, Chief of the Section for Economic Cooperation 
with Foreign (Developed) Countries. 

G. N. Bazhenov, Senior Expert. 

Ministry of Merchant Marine 

I. M. Averin, Chief, Foreign Relations Department. 
I MEMO {Institute of World Economy & International Relations) 

V. A. Martynov, Deputy Director. 

V. A. Morozov. 

A. V. Anikin, Chief, USA Section. 

V. B. Yakubovksy. 


Port of Leningrad 

Oleg A. Terekhov, General Manager. 

Appendix II 

List of Economic Information Supplied by the Soviet Union 
Under the Agricultural Agreement 

Dear Mr. Gilmore: In accordance with the agreement expressed 
by Deputy Minister of Agriculture Boris Runov during his conversa- 
tion with you, may I refer } t ou to the attached list of economic infor- 
mation regularly supplied by the Soviet Side under the Agricultural 




List of information on agriculture, on industries processing agricultural raw materials, and on certain other questions 
provided by the Soviet Side in response to requests by the American Side. 

(1) (2) (3) (4) 


I-1-. Sown areas for agriculture crops in 1974 (preliminary data) Yearly August. 

1-2 Sown areas of agricultural crops (final data) gross harvest and Yearly February. 

yield of agricultural crops (preliminary data). 
1-3 Gross harvest and yield of major agricultural crops (final data) Yearly.. July of the fol- 
lowing year. 
1-4 Operational data on the harvest of grain and sunflower (size of 4 dates per year. During harvest. 

harvested area according to plan and actually). 

1-5 Production of raw cotton, including data on fine fibered cotton Yearly. November. 

1-6 Fertilizer by crops applied per 1 hectare of sown area Yearly March. 

1-7 Sown area under certified and recommended varieties by Republics. Yearly. February. 


1-8 Population of major livestock and poultry on collective and state Monthly by the Before the 15th. 

farms U.S.S.R. 1st of the 

1-9 Number of major livestock and poultry (preliminary data on the Yearly.. February. 

census as of Jan. 1. 
1-10 Number of livestock and poultry by sex and age groups (final Yearly... June. 

results of census of livestock and poultry as of Jan. 1). 
I— 1 1 Livestock and poultry meat production by type (live and slaughter Yearly August. 

weight, milk, wool, eggs, skins and pelts, fur, down and feathers, 

raw silk and honey on collective and state farms U.S.S.R. (final 

1-12 Use of feed: by majorfeed categories, for all types of livestock and Yearly. July. 

poultry on collective and state farms. 
1-13 Number of livestock slaughtered for meat Yearly August. 


1-14 Grain sales to the Government in total and by crops in standard/ Yearly.. November. 

recalculated weight. 


1-15 Production of the food industry Yearly June-July. 

1-16 Production of the food industry current data. Monthly Month after the 


1-17 Production of oilcake, oil meal and fish meal Yearly February, April. 


1-18 Consumption of major products per capita: meat and lard, milk Yearly October. 

and milk products, bread products. 

Note: Economic information (sec. I points 1-18) is usually presented for the period of the last 10 yr. 


Appendix III 

Letter From Robert J. Blackwell, Assistant Secretary for 
Maritime Affairs, Depart^iext of Commerce 

U.S. Department of Commerce, 
The Assistaxt Secretary for Maritime AtIairs, 

Washington, D.C., January 15, 1976. 
Mr. Richard Gilmore, 

Proiessional Staff Member, Foreign Relations Committee, 
U.S. Senate, Washington, B.C. 

Dear Mr. Gilmore : Further to our discussions concerning the 
U.S.-U.S.S.R. Maritime Agreement, I am enclosing a summary 
indicating the participation of U.S., Soviet and third flag vessels in the 
carriage of U.S. grain from the inception of the Agreement in 1972 
through December 31, 1975. 

Contrary to the substantial delays which occurred in U.S. ports in 
1973, there have been no significant delays in U.S. ports in connection 
with the recent grain sales to the Soviet Union. However, with respect 
to delays in Soviet ports our data indicates that all vessels are still 
encountering average delays of between 30 to 40 days. While reports 
from Soviet maritime officials expressed belief that vessel delays would 
be reduced by January, the most recent information received from 
U.S. ship owners does not confirm this. The principal reasons for the 
continued delays in discharging are poor seasonal weather conditions 
and a lack of an adequate supply of rail cars, vacuvators and labor. 
Also, the occasional need to fumigate cargoes has contributed to the 
slow turnarounds. 

If I can be of any further assistance to you please feel free to call 
upon me at any time. 

Robert J. Blackwell, 

Assistant Secretary, 
-for Maritime Affairs. 


[In thousand metric tons] 

Accounting period 



3d flag 


July 1, 1972 to December 31, 1973 

Percent... , 









(65.6) . 


January 1 to December 31, 1974 



January 1 to December 31, 1975 1 


4, 388. 2 


Cumulative total grain 








Appendix IV 


(October 20, 1975) 

The Government of the United States of America ("USA") and the 
Government of the Union of Soviet Socialist Republics ("USSR"); 

Recalling the "Basic Principles of Relations Between the United 
States of America and the Union of Soviet Socialist Republics" of 
May 29, 1972; 

Desiring to strengthen long-term cooperation between the two 
countries on the basis of mutual benefit and equality; 

Mindful of the importance which the production of food, par- 
ticularly grain, has for the peoples of both countries; 

Recognizing the need to stabilize trade in grain between the two 

Affirming their conviction that cooperation in the field of trade 
will contribute to overall improvement of relations between the two 

Have agreed as follows 

Article I 

The Government of the USA and the Government of the USSR 
hereb}^ enter into an Agreement for the purchase and sale of wheat 
and corn for supply to the USSR. To this end, during the period that 
this Agreement is in force, except as otherwise agreed by the Parties, 
(i) the foreign trade organizations of the USSR shall purchase from 
private commercial sources, for shipment in each twelve month 
period beginning October 1, 1976, six million metric tons of wheat 
and corn, in approximately equal proportions, grown in the USA; 
and (ii) the Government of the USA shall employ its good offices to 
facilitate and encourage such sales by private commercial sources. 

The foreign trade organizations of the USSR may increase this 
quantity without consultations by up to two million metric tons in 
any twelve month period, beginning October 1, 1976 unless the Gov- 
ernment of the USA determines that the USA has a grain supply of 
less than 225 million metric tons as defined in Article V. 

Purchases/sales of wheat and corn under this Agreement will be 
made at the market price prevailing for these products at the time 
of purchase/sale and in accordance with normal commercial terms. 

Article II 

During the term of this Agreement, except as otherwise agreed 
by the Parties, the Government of the USA shall not exercise any 
discretionary authority available to it under United States law to 
control exports of wheat and corn purchased for supply to the USSR 
in accordance with Article I. 



Article III 

In carrying out their obligations under this Agreement, the foreign 
trade organizations of the USSR shall endeavor to space their pur- 
chases in the USA and shipments to the USSR as evenly as possible 
over each 12-month period. 

Article IV 

The Government of the USSR shall assure that, except as the 
Parties may otherwise agree, all wheat and corn grown in the USA 
and purchased by foreign trade organizations of the USSR shall be 
supplied for consumption in the USSR. 

Article V 

In any year this Agreement is in force when the total grain supply 
in the USA, defined as the official United States Department of 
Agriculture estimates of the carry-in stocks of grain plus the official 
United States Department of Agriculture forward crop estimates for 
the coming crop year, falls below 225 million metric tons of all grains, 
the Government of the USA may reduce the quantity of wheat and 
corn available for purchase by foreign trade organizations of the 
USSR under Article I (i). 

Article VI 

Whenever the Government of the USSR wishes the foreign trade 
organizations of the USSR to be able to purchase more wheat or corn 
grown in the USA than the amounts specified in Article I, it shall 
immediately notify the Government of the USA. 

Whenever the Government of the USA wishes private commercial 
sources to be able to sell more wheat or corn grown in the USA than 
the amounts specified in Article I, it shall immediately notify the 
Government of the USSR. 

In both instances, the Parties will consult as soon as possible in 
order to reach agreement on possible quantities of grain to be supplied 
to the USSR prior to purchase/sale or conclusion of contracts for the 
purchase/sale of grain in amounts above those specified in Article I. 

Article VII 

It is understood that the shipment of wheat and corn from the USA 
to the USSR under this Agreement shall be in accord with the pro- 
visions of the American-Soviet Agreement on Maritime Matters which 
is in force during the period of shipments hereunder. 

Article VIII 

The Parties shall hold consultations concerning the implementation 
of this Agreement and related matters at intervals of six months 
beginning six months after the date of entry into force of this Agree- 
ment, and at any other time at the request of either Party. 


Article IX 

This Agreement shall enter into force on execution and shall remain 
in force until September 30, 1981 unless extended for a mutually 
agreed period. 

Done at Moscow, this day of October, 1975, in duplicate, in 

the English and Russian languages, both texts being equally authentic. 

For the Government of the For the Government of the Union 

United States of America: of Soviet Socialist Republics: 




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